China's Economic Rebalancing Issues

7/15/2013 10:52AM

China is finding it hard to rebalance its economy. But when it happens, the country’s growth rate is likely to come in at around half the 7% rate most pundits seem to be penciling in. Alen Mattich reports. Photo: Getty Images.

This transcript has been automatically generated and may not be 100% accurate.

... ay ay mm mm ... we're talking about China and into the second let's talk about China overnight overnight for us really ... odd China's GDP came in seven point five percent ... bang on what they predicted by ... within that we fell into the composition that is the real issue ... Alan manages with this joins us from London to talk about this ... Alan outlook ... not for nothing really smart post on the MoneyBeat blogged about this ... everyone knows trying to strike I changed the engine of their economy ... we look at this report and its seen that that change is not coming ... when ... we all know the inaugural in part yet ... if you look ... so um ... than the amount of ... investments ... I was writing this quarter's GDP I knew was it was up sharply from the previous quarter so it's ... it's but nearly six percentage points about seven percent comes from investment which is ... due to the fact that China is investing said about ... Chinese investor makes up ... half of its call me just on the conference call me that's ... the that's that's ... no it also because some of restructure cords Domestic mare ... for ... some new little prove to be a problem ... and you know the leadership in China understands that they have a problem with this with all this investment ... the malinvestment he mentioned either was a great admission to the ... yen the Mary Celeste Seaney utilities goes cities in China ... they know they have a problem ... but it seemed like a really does having trouble getting away from it ... well I absolutely our name it's it's very hard to make the transition from ... from having an army of us starts ... so utterly dependent on investment drive Ford's to ... soothe domestic household consumption for one thing when you start slowing down investment then you start to have to lay people off you you ... you cut back on non stop on wages and all the rest of the gold medal in ... the immediate first round of faculty to to ... talk to her ... domestic consumption said honey you honey make the transition will the government could ... I mean step in and due to its own stimulus to ... restructure the Connie more courts of welfare programs or to health programs nor respite ... but so far it seems to been reluctant to do the sort of Western stalled welfare and so it's it's tough it was to have less ... investment ... more domestic consumption but it doesn't make the transition or ... or or already have been politically can make the transition the much easier ... so it's you know it's a bit knows where was to be but dove but in some quite sure how to get there ... and he talked about in the in the column the high loudly about how one tear down this road of investment and too much investment ... it takes more more money just to maintain it ... they are really of difficult talks on the ... well absolutely and and if you look of the amount of of ... of of of of on credit demand for Gov was coming into Connie last ... two years so ... I mean really it's about how much ... how much growth there was some in the credits going off but growth has been slowing down ... and um and then eventually you reach some point were you know the more the ... marginal returns are so small that the top think something else ... and I don't know how they're going to do it but ... I've but still beat ... he noted that don't have to be so that would be nice to be upset over this difficult situation for an answer leads to this whole point of their committed to doing this ... is not an easy city or pollen is that the conclusion you draw ... your play going to see Chinese GDP continued to get lower and lower ... what I think so I'm Michael Pattison is of ... very smart guy who runs the use of Professor Peter is the fifteen ... of these ... long forecasts the Chinese GDP was one of ... the rate was gonna drop to ... consider rounds three three to four percent ... fourth the end of this decade ... and on and you know perhaps you know I mean it won't come this year among all come next year but it'll come ... and when it does it'll feel what the real trial because even though three to four percent thought sounds really good ... for for ... the Chinese economy I think ... you know people there ... that people generally something that around six percent is is is sort of ... stalling speed for China's for three to four percent it is is is can be a bit of a Shell ... gas emitted from Alan matters think you're a much good stuff on the block has always said